How We Won the Cold War

Map-Flag_of_the_Soviet_Union

“File:Map-Flag of the Soviet Union.svg” by NuclearVacuum is licensed under CC BY-SA 3.0

We hear every day how we need to get tough for our new cold war with China.  The unstated subtext is that threats and bluster are the “getting tough” that’s going to win. In fact we know exactly what won the last Cold War.  It’s worth paying attention to what that was.

The dynamism of our economy won the last cold war.   Our technological base reinvented itself many times over, and the top down economy of the USSR just couldn’t match it.  There were many individual factors behind the collapse—low growth, corrupt state enterprises, spending on defense, oil price collapse, Chernobyl.  But what it all came down to is that the Soviet economy collapsed because it just couldn’t find the resources to keep up.

Many factors made the difference—the historical strengths of the United States:

– A free market for new technologies.  A venture capital industry supported by anti-trust enforcement to protect new companies from powerful old ones.

– The US as world’s best destination for entrepreneurs from everywhere to realize their dreams.

– Openness to ideas from everywhere and active participation in international organizations of all kinds.

– Government support for pure research–to be on the forefront as new developments translated to opportunities.

– Expanding equality of opportunity, so ideas can come from everywhere.

The USSR had a well-trained population of elite engineers and scientists, but ultimately they couldn’t compete with the ability of the US model to reinvent itself and grow.

What can we say about the current situation with China?  There are three points:

  1. The rise of China actually followed the US model.

One part of this is familiar—China invested in its people:  education, infrastructure, health care, etc.  The regime tolerated no disagreements, but it put money (as we used to) into the environment necessary for success.

However the bigger part is less-discussed—what kicked off the Chinese miracle was an accidental surge of free enterprise.  As a weakening of collective economic control, Chinese municipalities were freed to carry out their own businesses once obligations to the state had been met.  That minor bit of freedom took over the economy.  Independent municipal businesses became dominant to the point that they dwarfed the hugely-corrupt state-run enterprises.  Municipal businesses grew into the independent private sector.

  1. Under Xi, China is abandoning that approach in favor of a return to central planning and control.

Xi is a princeling—a child of former revolutionaries brought up to believe he was born to rule.  All of his recent actions have been directed at crushing independent forces in the Chinese economy.  Appointments have been based on loyalty above all.

China is back to the old Soviet and Chinese world of massive state enterprises and a dictated economy.   That won’t change the immediate future, but we have no reason to despair of our ability to compete.

  1. Under Trump we are similarly abandoning our strengths.

Trump, like Xi, is an autocrat who view himself as the all-encompassing genius who needs to run everything.  He picks winners and losers with tariffs.  He awards exceptions to supporters.  He ignores real problems (such as Covid) that he doesn’t want to deal with.  Job appointments are based on loyalty over competence.  Every one of the listed US strengths is at risk:

– New enterprises are sacrificed to the existing powers that be.

– Xenophobia and nativism are pushing entrepreneurs elsewhere.

– Global participation is discouraged.

– Science is discredited and only mainstream technologies (e.g. AI) or Trump whims are funded. Climate change can’t even be mentioned.

– A political strategy of divisiveness means we’re fighting internally rather than drawing on everyone for progress.

 

We didn’t beat the Russians by mimicking their authoritarian control and top-down economy.  We won because they couldn’t compete with our ability to reinvent ourselves over and over again.  We have that opportunity today, but we’re losing it to the false god of dictatorship.

Democracy is not a nicety but the core of our success.

Dictatorships lose.  All-powerful leaders make disastrous mistakes that cannot be remedied.  They can ignore the well-being of the population.  They create massive corruption that cannot be contained.  All these tendencies are visible today (Covid alone shows several), and the effect is—as always—accelerating.

We still like to talk about the power of democracy and free markets, but both are slipping away.  Voter suppression is an openly-discussed goal.  Anti-trust enforcement has effectively ceased to exist.  The power of corporate lobbyists has starved the public sector (including infrastructure of all kinds) and defended the economic status quo against all comers.

Our problems today are not weaknesses of democracy but an indication of how far we’ve strayed from it.  There’s no reason to despair for our competition with China—or for the country generally.  It’s just a sign we have to get back to doing what we’ve always done best.

The True Cost of CO2

It seems perfectly reasonable.  Each ton of CO2 added to the atmosphere causes damage.  We can estimate that damage by looking at what’s happening.

The Obama administration went through that exercise in some detail to justify environmental protection measures—and came up with $42 per ton.  The Trump administration people reduced that number to less than $7 and increased the future discounting factor from 3% to 7%.  That’s certainly a problem.

However the $42 figure is also wrong, and the whole notion of a dollar cost of CO2 undermines much of the discussion of the costs of climate change.

One way to see that is to look at the language we use to talk about hurricanes.  For starters I’m going to reference the usual storm class definitions:

hurricanes

As the wind speed increases, the damage rises by orders of magnitude.   At each stage the damage rises to such a degree that damage at the previous level becomes negligible.  There is no single number that tells you how much extra damage you’re going to get from a 5 mph increase in wind speed—it gets dramatically worse with each stage.  This is basically an exponential model; it is certainly not multiplication of windspeed by a number appropriate for category 1.

You can see how this argument plays with climate.  Starting with hurricanes, we have a basically linear relation of CO2 concentration and water surface temperature:

sea-surface-temp-download1-2016

And essentially the same is true for water surface temperature and maximum windspeeds. To that gets added the exponential relation of windspeed with damage.  Put it all that together and you get an exponential relationship between added CO2 and hurricane damage.

The same kind of relationship holds for almost any kind of climate damage you can think of.  Sea level rise first affects marginal districts but then more and more of mainstream society.  Droughts first affect marginal areas and gradually more and more of the breadbasket.  Health threats first affect the most vulnerable but eventually everyone.   Accelerating costs are the rule, not the exception.

How does this affect how we think about costs of climate change?  In fact we’re missing most of the damage.  The cost of a ton of carbon today has two components:  the costs that we measure today and the extra damage incurred by raising the CO2 level for all subsequent tons of CO2.  That second part is what you won’t get with any fixed value for the cost of CO2.  It may be harder to calculate, but it’s ultimately the main thing—because it’s adding CO2 that gets us to catastrophe.  We’re missing the step-ups in the hurricane example.

There’s a weird dichotomy between the science and the cost models.  On one hand we have scientific studies about truly catastrophic consequences of going beyond a global temperature increase of 1.5 degree C—even to 2.0 degrees C—and on the other hand we have the fixed value of $42 per ton.  In the second case we’re not charged for contributing to glacial melting that can’t be stopped before inundating both Bangladesh and Manhattan.  It’s beyond ludicrous that we’re applying discounting factors to future costs but not charging for the long-term consequences of that ton of CO2 that remains in the atmosphere!

For now the only viable number for the cost of a ton of CO2 in the atmosphere is actually how much it will cost to take it back out.  That number is currently about $1000 a ton. There are many people trying to do better; the current (undoubtedly overoptimistic) estimate is about $150 per ton.  That’s the lower bound.

Believe the scientists.  A catastrophe is a catastrophe.  You can’t make it go away with cost models that sweep it all under the rug.

The Coronavirus and the Limits of Capitalism

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“Lankenau Hospital” by Montgomery County Planning Commission licensed under CC BY-SA 2.0

It’s easy to look at the coronavirus as a one of a kind.  After all, who expected this cataclysm that came from nowhere?   How could anyone have predicted it?

In fact the world is full of low-probability events that you have to care about.   The coronavirus is on a par with airplane crashes and oil-rig explosions.  Capitalism is not good at dealing with any of them.

There’s a myth about that sort of thing.  Of course we don’t need airline or aircraft regulation, because the companies in question know what a disaster would mean and will take care that such things don’t happen.  That’s a nice story, but it’s false.   People don’t get promoted because of events that didn’t happen.  They do get promoted by saving money wasted on something that’s never going to occur.

If you’re going to stop that sort of thing from happening, you need a different mindset.  Government has to spend money on regulation and public health and safe, comprehensive infrastructure.   No one else is going to do it.  We now know unequivocally that we decided we didn’t have to care about the CDC.  It has come back to haunt us.  There’s more where that came from.

In fact there’s a whole bunch of other things we’ve decided we don’t have to care about.  After all, “I don’t have to care” has been the liberating elixir of our age.  Many of these we’ve talked about before, but it’s worth recalling some here:

Climate change

Avoiding a depression (clearly relevant now)

Nuclear proliferation

Losing our edge in science and technology

We’ve washed our hands of all of this, blithely punting to a private sector that is no more prepared than for the coronavirus.

The message from the coronavirus is that bad things really can happen, no matter how much we may want to avoid thinking about them.

The coronavirus is the canary in the mine.   We’ll get over it somehow, but we’ve had our warning.

The Crisis of our State of the Union

Trump’s State of the Union deserves a full response.

It was bad enough to sit through the deceptions and lies in the description of the national economy—where very small actual gains (smallest annual reduction in unemployment in any three-year period since the 2008 crash; worst real wage growth at low unemployment in at least 40 years) were bought at enormously high cost (1.4T tax cut that went directly to Wall Street through artificial earnings and stock buybacks; nothing for infrastructure, education, opioid epidemic, etc.).

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However, all of that is just the beginning.  Many commentators have made that point (although many talking-head economists have done the country a disservice by exaggerating the benefits and ignoring the costs).

The real issue is that you would never guess that we live in crucial times for this country and the world.  You might expect that now I’m going to talk about climate change.   But even that is only a piece of it.  Only in the “I don’t have to care” world of today’s Republican Party is the State of the Union grounds for applause.

We are presiding over the demise of America’s promise in irresponsibility, incompetence, and simple vanity.  Let’s go down a list.

  1. Climate change

On climate change there can be no question of the urgency and magnitude of the challenge.  Science has given us a carbon budget we have to meet. The administration denies all of it and works systematically to undermine world progress.  As we’ve noted before, if we act today we have the elements of victory—but we also have ample evidence it’s a near thing.

Inaction on this subject is a grave risk to ourselves, our children, and the rest of humanity.

  1. World economic order

The elephant hiding in plain sight is the growth of the Chinese economy.  We are in the process of being supplanted as the world’s largest economy, and the room for growth there is enormous—China is already our equal by some measures, but their per-capita income still ranks only as 108th!  The world is preparing a new international order, and we’re in danger of missing the boat.

We have a chance to define notions of trade that open markets everywhere and embrace standards for wages and working conditions, environmental concerns (including climate change), and human rights.  In some sense this is a necessary complement to what’s needed for climate change.  However we are losing leverage for that enterprise every day.

We’ve taken the position (without exaggeration) that God has chosen us to rule, so we should abolish all international norms that might constrain our behavior.  With the growth of China that’s a losing game.  Even today we were unable to dictate to China in our trade war, and it’s China—not us—that’s the biggest foreign market for European cars.  We’re not going to be calling the shots forever, and without rules it’s their game.  In this Trump is not defending the US interest against the Chinese, he’s defending his personal dictatorial power against the interest of the country.  We have a very limited window to take back the promise.

  1. Technology

There will always be changes in technology, but the pace of change has reached the point where we have to keep up or lose.  This affects all aspects of our success as a country:  our national income, the jobs of our workers, the strength of our military.

Instead of recognizing that reality we’ve got our head in the sand.  Some examples:

– We’ve done everything possible to discredit scientists and science generally, and for climate change and environment protection in particular.

– We’ve disbanded scientific advisory councils in government.

– We’ve had multiple State of the Union addresses where the only mention of education was vocational.

– We’ve killed net neutrality, thereby sacrificing new enterprises to the interests of the phone companies.

– On 5G and AI the government has come late to the party, without real plans.  For 5G in particular we’re actually asking our allies just to wait until we’ve figured out some alternative to Huawei.  This is worse than a failure of planning—5G applications are what’s most important, and waiting is punting that stage of technology back to the Chinese.

– More generally there’s simply no understanding of the importance of government in funding exploratory research—for technologies before the stage where private companies can run with them.  The tax cuts included a targeted punishment for major research universities.

– Finally the current rampant xenophobia flies in the face of the past and current contributions of foreigners to our technological strength.  We must continue to be the destination of choice for entrepreneurs looking to realize their visions.

We are simply ignoring the technological challenges and what has made us successful.  God only helps those who help themselves.

  1. Nuclear proliferation

This may seem a more limited issue, but that’s only because it hasn’t hit yet.  There are still only a limited number of players, largely under control.  But we’re doing everything possible to change that.

We’ve not only presented the world with the contrast in our treatments of North Korea and Iran, we’ve argued specifically for nations to do what it takes for their own defense.  We’ve eschewed the sort of international cooperation necessary to prevent new entrants.  And we’ve given Saudi Arabia nuclear material and technology without asking any questions at all.

The only reason we were less worried about this in the past was that world leaders had all recognized the nature of the threat.   We’re no longer keeping our eyes on the ball.  Nuclear technology gets ever easier.  As more entrants join the nuclear club, it gets harder to control their behavior and prevent the further sale of nuclear technology to third-parties of whatever ilk.  The North Koreans have done it before.

The clock is ticking.

  1. National ideals

It’s shocking how shallow the support for democracy has turned out to be.  In Sinclair Lewis’ “It Can’t Happen Here” many people had to die for the dictators to take over.  The reality was much easier.

Democracy is not a luxury.  It is key to what made this country what it is.  We were never perfect, but we were much more a country “of the people, by the people, for the people” than had ever existed before.

We’re losing all of that right down the line:

– We’ve reversed our progress in expanding suffrage, and are now looking for reasons to block people from voting.  The Citizens United ruling put rich people and corporations in control of elections.  Deliberate voter suppression by state governments is stated Republican policy.

– Support for public education is declining, and funding is still below 2008 levels.

– Upward mobility is now below that of most other developed countries.

– The religious right is in charge of what happens to women’s bodies.

– We’ve lost the social cohesion needed for big national efforts.  The President no longer even pretends to represent the nation—he’s a warlord who delivers spoils for his supporters.

There are plenty of historical examples of how hard it is to reclaim democracy once it’s gone.  If we’re going to have the strength of a country by and for the people, things had better change fast.

 

We live in a crucial time.  On one hand we could even see massive destruction of humanity; on the other we could see an unprecedented level of international cooperation as a precursor to a very prosperous and peaceful world.

One thing we can’t do is ignore the reality of our time.  We can’t afford the “I don’t have to care” puffery of this criminally fictitious State of the Union.

We Just Lost the Trade War with China

With all the carefully-hedged language around Trump’s Phase 1 deal with China, it’s not surprising people are unclear about what it means.  Even in this blog we haven’t been explicit enough.  It’s time to remedy that.  There is no ambiguity about what happened.  We just lost the trade war with China.

We start with the agreement itself.   There are two parts:

  1.  The $200 B plan to buy US products is the more publicized but murkier part.  The purchases are spread over two years and are allowed only in specific, politically-advantageous sectors.  Since there is no notion of market reform, it is unclear who is doing the buying, or how the sector targets can work.  What’s more, given the arbitrary level of the targets and the fact that either party to the agreement can just opt out, there is little actual skin in the game.  In fact, as has been noted, it gives the Chinese new leverage over the US in that they can threaten to terminate the now-vaunted purchases any time they want.  Nothing will be known about real progress until after the election. Overall the $200B figure is highly inflated at best; at worst this is an electoral stunt for Trump voters in the designated sectors.
  2. The rest is a collection of statements of principle with no language for enforcement. Whether the Chinese will or won’t comply will be on their terms not ours.  This is entirely parallel to what we got on denuclearization from the North Koreans.  There is no substantive progress on any of the issues targeted by the trade war.

These conclusions have appeared in the press, but they tend to get drowned out in the general relief that accompanies a truce.  So it’s easy to think something important has happened.  In fact Trump needed a deal for the election, so he declared victory—by dialing down his own hostilities.  And the Chinese were happy to punt all substantive trade questions at least a year or two down the road (more on that in a minute).  That’s all that has happened with Phase 1.

But the main scam is the term “Phase 1” itself.

“Phase 1” implies we’re in a continuing process to get to our objectives in the trade wars.   That is out-and-out false.  We took a shot at winning a trade war, and we didn’t win it.  Our leverage is diminishing with each passing day.

The premise of the trade war, as Trump himself said, was that we had the power to destroy the Chinese economy, so we could dictate the terms of the peace.  That’s why the trade war was going to be “easy”.  In fact we represented 18% of Chinese exports, and exports represented 20% of Chinese GDP (see chart below).  We don’t own them.  This is just one more example of the danger in our blind belief in overwhelming US power.  It didn’t work.

What’s more both of those percentage numbers are going the wrong way.  Chinese exports are recovering overall since the hit at the start of our tariffs—but with the US now a smaller part.

china_balance

Further the Chinese have been working systematically to increase domestic consumption and thereby reduce the dependence on exports.  Here is the picture (2019 figures are down further but not finalized yet):

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The Phase 1 deal demonstrates that we don’t have the leverage to win today.  For the future we’ve just seen the decreasing financial leverage.  To that gets added the decreased dependence on US technology, fueled in part by the threats to deny it. (It’s hard to imagine anything less productive than making them mistrust our operating systems.)  The trade war has ended constraints on what it takes to fight back.  Chinese hardliners have taken control of the relationship, and the uptick in intellectual property theft is one result.  Despite the rhetoric, prospects will not be better next year.  There’s no Phase 2 triumph coming for this trade war.

 

When you start a war there are consequences, even if you quit.  Your opponent is going to continue to treat you as an enemy unless something pretty dramatic changes.  The Chinese have made it clear that they want to be as insulated from the US as possible. Since they are rapidly becoming both the world’s largest market and the world’s largest proving ground for new ideas, that’s not a great situation.  There are other possible consequences as well:  a new cold war, lower world economic growth, an uncontrolled and expensive arms race, no leverage on Chinese behavior, even increased chance of war.

The rejoinder to all this is of course “We have to do it.  We have to get tough.  We can’t just cave in as in the past.”  On that subject the press has done us all a great disservice.  There are several points:

  1. We didn’t get tough, we got weak. We abandoned our allies to get ourselves an exclusive deal. We lost half our leverage, and suffered the consequences.  That’s what happens when you just assume overwhelming power.
  2. We didn’t cave in before, we got results instead of pain and bluster. Under Obama both the balance of payments deficit and intellectual property theft were reduced significantly—instead of the opposite. We also made important progress (some since reversed) with climate change.  The job wasn’t finished, but for all the chest-beating, we’ve gone backward since.   It should also be noted that essentially 100% of the job loss from Chinese competition occurred under George Bush or as a direct result of his 2008 crash.   Nothing prevented action on currency manipulation other than the distraction of our then-current war.

mfg_job_loss

  1. The rise of China is not something in our power to stop. They’re not just cheating; they’re doing a number of things right, some of which we’ve forgotten how to do. It is counterproductive to think we can make it all go away.  You can’t win just by being a bully; you have to play the game.
  2. Finally, we had every opportunity to make real progress with the Chinese. They expected to renegotiate China’s status as a developing country for the WTO, and they certainly expected to face a unified front in the West. There is actually a common interest in intellectual property—especially when it’s not used as a weapon against them.  It’s also worth noting that government subsidies to private companies aren’t so black and white here either.  There was an agreement to be had for labor, environment, and world-wide prosperity.  We lost it by going gung-ho for our very own holy war.

There may still be opportunities for full leverage and common interest, but considerable damage has already been done.

The result of the trade war can be summarized in very few words:  we botched it, got nothing, and hurt ourselves badly in the process.

Trump the Firebug in China Phase 1

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A year and a half ago I had a piece about Trump’s firebug behavior, where he whips up a crisis which he then resolves by dialing down what he did himself.   Such behavior is not only deceptive, but frequently also damaging—stopping the fire doesn’t necessary bring everything back to zero.  North Korea was the prime example in that earlier piece.  In that case, even after we turned down the fire we had legitimized the regime, encouraged nuclear proliferation, and basically stopped caring about the dangers they represent.  It remains shockingly easy to get the press to fall for these firebug scenarios.

At the time I worried that the same was going to happen with China:  “there should be no problem getting the kind of PR-oriented agreement we got from Kim.  Market access can be as murky as denuclearization.”

It took longer than I expected (he didn’t do it for the midterms, he did it for the presidential election), but that’s what we’ve got.  The Phase 1 Agreement dials down Trump’s own trade war with a declaration of victory that lets everyone celebrate the peace.  In exchange for Trump’s toning down the trade war, the agreement combines one-shot questionable purchases with a number unenforced statements of principle (think denuclearization).  There is no substantive progress on any of the issues that started the trade war.  And for subsequent phases, as noted before, our leverage is diminishing every day.

We’ve been sold another firebug triumph—and in this case the damage is serious.  The trade war delivered nothing and fractured the world in the process.  This is a failure of policy with real consequences.  It is horrifying that the press coverage can’t get beyond speculation about what might be good or bad in the vacuous agreement itself.  China is too important for this.  The issue is not the fire-ending nonsense; it is the damage done.

On that subject I summarized my feelings this morning in a comment to David Leonhardt’s article in today’s NY Times: “What Americans Don’t Understand About China’s Power”:

This is a good piece, but it understates the problems with our China policy.

We have issues with China, but a unilateral trade war is not going to resolve any of them. Our recent phase one agreement is a case in point—like our agreement with the North Koreans it does little more than tone down the belligerence we created:  questionable one-shot purchases and unenforceable statements of principle.

The trade war itself, however, has lasting consequences. Trump’s threats to destroy the Chinese economy legitimized Chinese hardliners’ position that the West was still colonialist and not to be trusted. Complete independence and self sufficiency were imperative.  Intellectual property theft went way up.

Our current Chinese policy is nothing more than unproductive grandstanding.  It is not “finally getting tough with the cheats”. Obama actually reduced intellectual property theft and the balance of payments deficit, rather than the opposite. Same for Chinese behavior on climate change.

If we actually want to make progress, it needs to be together with our allies (to double leverage) and in the context of international rules of fair trade—rather than what we think we can shove down their throats to maintain our dominance.  [Rules of trade have more credibility when we’re willing to apply them to ourselves!]

The trade war does not resolve issues, does lead to a fracturing of the world (with reduced security, prosperity, and US influence), and—as Leonhardt says—distracts us from the things we really need to do.

Irrelevance

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“P1040738” by frederique.baggio is licensed under CC BY-NC-SA 2.0

I find I can’t watch British TV series anymore without a post-Brexit shudder.

Those programs are no longer studies in quirkiness from a historically-great country that is almost us.  That country is gone.   It can’t even keep its own pieces together.  The solid core of the country has evaporated.  All that’s left are the quirks, and many of those are rather sordid.

Britain is a land possessed by dreams of lost empire, unwilling to accept either the now-visible reality of that imperial past or the self-evident fact that it is gone.  Ready to slap the face of anyone who reminds them of either.  What could be more preposterous?

We’re in the running.

We had our own years of empire.  By virtue of geography we were the last country left standing at the end of World War II, so we put together the world afterward.  And we ran it.  And we got comfortable with the idea that was the only way the world could be.  God chose the United States of America to rule the world.  The Brits had the same idea.

Those were the good old days.  Not only did America rule the world, but American products reigned supreme.  And notions of common effort left from the war drove broad-based prosperity through measures like the GI Bill.

Things aren’t quite the same anymore.  The rest of the world grew up.  We can’t just order everyone else around, and our products don’t automatically win everywhere.  And we seem to have forgotten those notions of common effort, with sad consequences for the spread of wealth in the population.

Unfortunately, like Britain, we haven’t forgotten empire.  That’s what we have to get back.  Rule the world.  Same population.  Blacks under control.  Winning everything.  Pot of gold for everyone.  God said so.

We have even more to lose than the Brits.

The United States is a prosperous country, in many respects the richest in the world.  We’ve messed up our social contract, but that’s ours to fix.  In the same way, there are no insurmountable problems in making worldwide growth good for everyone.  Even climate change, a monumental problem, has the technological basis for a solution.

We stand ready to sacrifice all of that to a fantasy of empire as vaporous as the British one.  It’s scary as hell that we seem ready to repeat history.  Their Brexit vote presaged Trump—what does the Boris Johnson vote say now?

Symbolism to the contrary, we have a better chance.  In Britain the vagaries of their electoral system prevented a legitimate revote on Brexit.  Regardless of who gets the Democratic nomination, we will get a chance a to vote on the future of the country and the planet.  History doesn’t repeat, people do.

But history will certainly judge.

Random Thoughts to Start the Year

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“Happy New Year” by nigelhowe is licensed under CC BY-NC 2.0

The True History of Trickle Down

As many have pointed out, it’s hard to understand how trickle-down economics continues to persist in the absence of any demonstrable success.  Money is of course an answer, but actually there’s a genealogy to it.

I recently came across a book that helped make the point.  It wasn’t an economics book, it was a novel—The Wooden Shepherdess by Richard Hughes.   Hughes was a comfortably upper-class Oxford graduate who spent much of his life in his castle in Wales.   The Wooden Shepherdess is a fictionalized account of the Prohibition era in the US and of England and Germany as Nazism was growing in the thirties.  Interesting times.

What’s most striking about the book, though, is its attitude toward class.  The author is perfectly clear about the grotesque inequality of the time and even sympathetic to the poor.  But he has an out:  that’s just the way it has to be.  It’s either this or chaos, so you’ve got to have this.  The speaking voice has no crisis of conscience, no concern about moral issues, no need to think much about it at all.  It just has to be.

At first that attitude seems strange—until you realize that trickle-down is only a repackaging of the same thing.  Sure there’s inequality, sure it’s growing, sure the minimum wage is ridiculous, sure 44% of the work force is in low-wage, dead-end jobs.  It all doesn’t matter. We need the Gods at the top, or it all collapses. It just has to be.

I once wrote a piece called “Sacrifices to the Gods of Jobs”.  There’s something in humans that wants to solve all problems by placating the heavenly or earthly powers that be.  That’s why it’s so tough to fight trickle-down.  And those Gods will ride it for all they can get.

 

Policy Issues for Iran Apply Also to China

Paul Krugman had a well-expressed comment about how we as a country often misunderstand the effects of foreign policy.  As he put it, we frequently don’t want to acknowledge that “we’re not the only country whose citizens would rather pay a heavy price, in money and even in blood, than make what they see as humiliating concessions.”  His piece was largely about Iran, but the blindness is even greater for China.

After Trump declared he was going to destroy their economy and there was nothing they could do about it, their behavior got worse. It was not surprising that hard liners advocating complete self-sufficiency were proven right, and that intellectual property theft became a national imperative.  It’s precisely the blindness Krugman mentions to expect anything else.

Nonetheless, both the left-wing and the right-wing have signed onto the economic war with fervor.  The press doesn’t dare talk about anything else.  A weird aspect of it is that we seem to believe we’re defending the Chinese population against the totalitarian government—whereas the population has in fact reacted as Krugman described.  That’s one reason we’ve lost essentially all leverage on Hong Kong and the Uighurs.

We are correct in defending our interests with China, but the point here is that an economic war is a poor way to do it.  In actual results (IP theft and trade imbalance) we’re doing much worse than before Trump. What’s more, both countries need to be able to work together on areas of common interest—such as climate change, where things have gone badly backwards.  Our economic crusade is about as useful as the Medieval ones.

This isn’t a question of being nice.  It’s just sense.

 

Squandering the Future

Now that Iraqis have decided they’ve had enough of the American presence, it’s a good time to look at the legacy of the Iraq war and other ways we’ve squandered our national wealth.  We’re not the first country to impoverish ourselves through war and other profligacy, but—by the silence of the press—we seem to be among the most thoroughly unaware.

In Iraq we fought a $3T war whose primary beneficiary was Iran.  The war was financed off-budget, without any real supervision of financial consequences.  Looking at the current state of the Middle East, it’s hard to see any US benefit but easy to find costs in bad will.  For the Iraqis it was an ongoing disaster from which they are still trying to recover.  For Iran it solidified, even institutionalized, their influence in Iraq.

Because of that war we ran huge deficits in good times.   That, combined with the later Republican “balanced budget” hypocrisy, has left the country in a persistent state of public-sector poverty.  Education and infrastructure funding are inadequate at all levels, and we just can’t come up with the money to fix it.  Nonetheless, after delivering both the war and the 2008 crash, George W. Bush has been rehabilitated to the point of canonization, and the Republican party has succeeded in removing all trace of his failures from public memory.

That’s convenient, because they went and did it again.  Trump’s tax cuts were a $1.5T ongoing present to businesses, who have chosen not to invest it in our future.  Instead they effectively passed it through to their rich investors via stock buybacks.  No investment in the businesses, and no money available for public infrastructure of any kind.  The money is gone.  And, as far as press coverage is concerned, without a trace.

That’s $4.5T in lost opportunities. It has consequences we see every day.  The American Society of Civil Engineers keeps a web site with a breakdown of national infrastructure requirements.   We currently rate a D+.  We’ve got parents desperate to get their kids in top private colleges, because we won’t support enough first-class public institutions.  And that’s not even talking about what’s necessary to combat climate change—which of course can’t be mentioned.

We don’t actually have a great economy.   We’re living on credit off the achievements of the past—with more than a little help from the hated immigrants.   We can talk about the evil Chinese all we want, but if we fall behind in that contest, it will be because we refuse to invest in the country and continue to give away the store.